There are 2 things that happen when a trader begins learning the principles of Elliott Wave. First there is a new fascination and a sense of awe to discover that financial markets are always forming patterns of trends followed by corrections. The waves of trends and corrections subdivide into smaller patterns on shorter time frames while any patterns are also part of a larger pattern. It ‘s like a fractal universe where every world is part of a larger world and inside of each world there is a smaller universe. In Taoist wisdom humans are seen as a microcosmic universe inside the macrocosm. The second thing that happens is a decrease in profit and higher percentage of losing trades.
Why is this? For several years I have been showing traders that this is because of the way that Elliott Wave is applied to a trading strategy. Elliott Wave traders believe that the way to trade successfully is to correctly label the current pattern and enter a trade based on the next piece of the puzzle. Once traders see that markets really do form these patterns nearly all the time they will be fascinated from then on even if they continue to lose more and more frequently. They believe that if they could just improve their ability to read these patterns they would then have winning trades nearly all the time.
But the truth is that Elliott Wave traders usually miss the point of how to use these patterns for increased probability of profitable trades. First of all markets are organic and not mechanical. So the patterns are more like plants in an organic garden. If we were to enter an organic garden and begin counting the leaves and measuring the stalks it would be a rather silly waste of time and would distract us from simply harvesting the vegetables and eating them. More on exactly how this works can be found in our Yin Yang Forex Trading Course.
Another point that should be obvious but eludes most Elliott Wave traders is how changing the frequency of their charts can enable traders to immediately see a different pattern which is already certain while a longer term pattern is still forming. Once you see this, your probability of winning increases dramatically. Each time a pattern is forming on one time frame and there are multiple possibilities for the conclusion of that pattern, there is another pattern that is already certain on the next shorter time frame. For the few traders who follow what I am saying this will become the most revolutionary breakthrough they have ever experienced in their trading.
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